Reclaiming Bank Account Charges

• Guides
• Published: 16 Oct 2008 in Money and Current Accounts

This is something of a long-running saga, the final chapters of which are unlikely to make themselves fully clear until later this year. Pressure groups, consumer groups, and customers themselves have long argued that the charges many high street banks impose on their customers for going overdrawn (so-called unarranged borrowing fees) are punitive and unfair.

On behalf of consumers, the Office of Fair Trading has taken legal action against the banks by claiming that their overdraft charges are unlawful and too high. The action turns on whether these “unarranged borrowing” or “unauthorised overdraft” fees are subject to the Unfair Terms in Consumer Contracts Regulations.

January 17th 2008 was the first day of the long legal battle to decide the matter one way or the other and proceedings have run their full course, claims by many thousands of angry customers will remain effectively on hold.

The indignant customers argue that it is unfair for banks to charge as much as £38 when the account holder has overstepped any agreed overdraft limit by only a few pence. On their behalf, the Office of Fair Trading insists that the actual cost to the bank can be as small as £2.50, allowing the banking industry to make an estimated £3.5 billion each year from such unauthorised borrowing charges.

Rules of ‘fairness’

For their part, the banks claimed in court that such overdraft charges should not be subject to normal 'fairness' rules.

Although the jury’s effectively still out on whether the banks or their customers have right on their side, it still makes sense for customers to register their own grievance over the banks’ practice and to take formal steps to recover any charges they might have paid in the past. Here’s how to do it:

• Inform your bank that you believe they have acted illegally by imposing the charges and the basis for your belief is the Unfair Terms in Consumer Contracts Regulations, 1999, which state that penalty charges must reflect administration costs alone
• Obtain copies of your bank statements for the past 6 years (your bank is obliged to provide them under the Data Protection Act) but this will incur a fee
• Tot up all the charges or fees imposed when you exceeded any agreed overdraft limit
• Write to your bank requesting a refund of all those charges, stating the above law and regulations
• If your bank offers to refund you only in part, reject the offer and demand a full refund
• If this request is refused, threaten to take action in the county court (if necessary, completing the online application for the action at www.moneyclaim.gov.uk )
• Unless the bank is prepared to meet your demand, it has 14 days to respond to your claim
• If it does respond, the bank has a further 14 days to enter an outline response to your petition, but most banks will pay up before the action reaches court
• If a refund is still refused and you receive the county court judgment against it, apply to the court for a warrant of execution, by completing form N323, again at www.moneyclaim.gov.uk

In attempt to get you to back down, your bank might threaten to close your bank account. Pre-empt this by setting up a new account elsewhere (and you could well find an alternative with lower charges and better rates of interest).

Although the jury’s still out on the basic question of fairness:

• many consumers feel that bank charges that penalise unauthorised borrowing are little short of extortionate;
• the Office of Fair Trading agrees that they are;
• public opinion and the groundswell of protest from many disgruntled customers could still sway the present intransigence of the banks;
• so, follow the step-by-step guide above to enter your claim for a full refund of all charges you might have paid.